The Great Energy Disruption

Nearly 10 months ago, Tony Seba, author of the 2014 book Clean Disruption of Energy and Transportation, posted a video on YouTube, “CleanDisruption.” In both, he projected that a nearly complete disruption of the energy business would begin in 2020 and be well underway by 2022, the year he projects for distributed solar power with battery backup to fall below the cost of transmitting electricity. It is a point at which centralized power plants, if they are to compete with solar-plus-storage, will have to provide power for free. He believes that all centralized electric power producers will be obsolete by 2030, as will conventional cars and utility companies.

I would suggest that anyone reading the book or watching the video keep in mind that the projections are wrong. Tony Seba gives really compelling reasoning leading to his conclusions. The problem is that the rate of change he expected seems to have been off a bit. It appears that he was much too conservative, and change is going on much faster than he anticipated.

In his March 2016 video, Seba talked about the fact that the cost of electricity from solar power had dropped below 5¢/kWh. Less than a year after that, it dropped below 3¢/kWh in multiple auctions. This is far faster than he anticipated, and would make the disruption happen sooner than 2022.

While the decline in the cost of solar power is clearly very great, however, the decline in the cost of grid storage appears to be taking off. Seba spoke of a decline in cost of 19% per year, but that rate has been exceeded by important technologies.

Lazard’s Levelized Cost of Storage Analysis – Version 2.0 has appeared, showing some important changes from version 1.0. While the Levelized Cost of Storage (LCOS) for several types of storage have declined at the rates consistent with what Seba suggested, three stand out — one of these is reported by Lazard, and the others appeared in recent news.

First, in the version 1.0 report, the LCOS of compressed air storage was reported at $192/MWh. This is a low figure for natural gas peaking plants. In version 2.0, however, the figure had dropped 33% to $116–140/MWh, well below what those peaking plants normally charge. This shows a technology for storage that is getting competitive with nuclear power generation.

Second, examining the 1.0 and 2.0 versions of the report, we can see a decline of 23% in the costs of lithium-ion batteries. Lazard’s analysts may not have known that Tesla would essentially double the storage capacity of its powerwall batteries with an increase in price that really only covered the addition of new inverters. The Gigafactory has come online, even though it is only about 35% finished, and this will drive the price of lithium-ion batteries down further. These changes point to reductions in the costs of storage on the level of 50%.

A third story that could change the market has come from US battery manufacturer Eos. This company has announced a partnership with Siemens on storage solutions. Eos’ batteries are built on a minimum unit size of 1000 MW & 4000 MWh, at prices ranging from $160 to $200 per kWh. Eos’ website gives the LCOE of energy stored in the battery at 12¢/kWh to 17¢/kWh. The LCOE is well below the minimum cost of that of a gas peaking plant, and at a point where it is starting to get competitive with nuclear power.

Combined with the Lazard LCOE reports for solar and wind, these prices for storage are already getting to the point of being very much disruptive. In Lazard’s latest Levelized Cost of Electricity Analysis (version 10.0), solar power is at an average of 4.6¢/kWh to $6.1¢/kWh and wind power at 3.2¢/kWh to 6.2¢/kWh. The new low-cost storage solutions do not really have to compete with nuclear, coal, or gas. What they need to do is to combine with wind and solar power to compete with baseload power. It looks like that could be happening already.

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